Alcosan limits chief's leeway on contract change orders

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Additional electrical work in the Allegheny County Sanitary Authority's new operations and maintenance building cost nearly $60,000 and ballooned the initial contract past $3 million.

Replacing steam lines near Alcosan's administration annex tacked $47,762 on to another contract.

More than 200 extra tons of stone and other materials added $74,015 to a contract for work on a stream in Bellevue.

Between January 2009 and October 2012, Alcosan Executive Director Arletta Scott Williams authorized more than $2.32 million in spending increases to authority contracts and was rarely required to seek board approval.

“It takes a lot of trust to allow somebody to make large changes like that,” said Jake Haulk, president of the Allegheny Institute for Public Policy in Castle Shannon.

Williams was not available for comment, said authority spokeswoman Nancy Barylak. Barylak said Alcosan shows the board every change order, regardless of whether approval is needed.

Alcosan's spending has come under scrutiny as the authority prepares to manage a $2.8 billion, 20-year project to keep raw sewage from polluting rivers.

With an annual budget of nearly $111.5 million, Alcosan treats wastewater from more than 900,000 customers in 83 communities in Allegheny County, including Pittsburgh.

Alcosan's procedure for granting contract change orders is a central issue in an audit of the authority City Controller Michael Lamb's office is conducting.

Previously, Alcosan's policy allowed the executive director to authorize change orders — increasing or decreasing the size of a contract — without board approval if the increase did not top $100,000 or push the total amount of change orders past 10 percent of a contract. The board changed the policy in November, dropping the threshold to $30,000 and not more than 5 percent of the contract, according to minutes from that month's board meeting.

Barylak said the board set the thresholds, including the $100,000 limit.

“When you're dealing with public money and the authority is public, you need to make sure you are dotting every ‘I' and crossing every ‘T,' ” said Haulk, who was more comfortable with the $30,000 limit, saying it gave the authority some leeway in contract spending while it kept board oversight for high-dollar changes.

Pittsburgh City Councilwoman Theresa Kail-Smith noted the policy change in her resignation letter from the board. Smith, appointed to the board by Mayor Luke Ravenstahl, resigned in July, writing that despite the changes — including limiting the size of change orders made without board approval — she “no longer felt comfortable serving while continually being blind-sided by actions unbeknownst to the board until after the fact.”

The board approved only two of 114 change orders increasing contracts from January 2009 until the policy change in November, records show. Under Alcosan's old policy, the board was required to approve increases of:

• $205,000 in October 2012 for improvements to flap gates that regulate the flow of water at various locations;

• $125,000 in February 2012 for 1,250 tons of stone for the Jack's Run sewer and stream culvert rehabilitation, relocation and creek restoration.

Had the new change order policy been in place since 2009, approval would have been needed for 23 change orders totaling $1.34 million.

In some cases, change orders returned money to Alcosan. The amount of additional money approved by change orders far outweighed reductions, however. Orders can reflect changes in the number of days needed to complete a project.

Policies regulating when board members must approve a change order vary among authorities.

The Sports and Exhibition Authority's board approved change orders ranging from $7,000 during its February meeting to $283,174.43 in August, according to meeting minutes.

In Cleveland, when the Northeast Ohio Regional Sewer District's board approves a contract, an additional 10 percent is automatically added to the amount to cover potential change orders, said Executive Director Julius Ciaccia. As executive director, Ciaccia is allowed to authorize change orders within the 10 percent without board approval.

Ciaccia said the $30,000 and 5 percent threshold might be too limiting, requiring the authority to halt work frequently and wait for the board to approve changes.

“You have to understand these are complex projects, and there are always going to be change orders,” Ciaccia said. “You want to be able to manage them nimbly.”

Aaron Aupperlee is a staff writer for Trib Total Media. He can be reached at 412-320-7986 or aaupperlee@tribweb.com.

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